Buy Restaurant Brands Asia Ltd for the Target Rs 125 by Motilal Oswal Financial Services Ltd
Robust India performance; confidence-boosting print
* Restaurant Brands Asia (RBA) reported 24% YoY revenue growth in its India business (est. 19%), driven by a 14% YoY increase in store count. RBA maintained industry-leading same-store sales growth (SSSG) at 13% (est. 8%), well supported by healthy traction across both dine-in and delivery channels, aided by value offerings. Management indicated that the positive momentum continued in July, while new launches such as Peri Burgers and Korean Burgers received a strong consumer response and helped drive incremental traffic.
* India GM expanded 310bp YoY and 60bp QoQ to 70.8%, aided by a favorable product mix, menu optimization and continued supply-chain efficiencies. RBA did not announce any meaningful price hikes during the quarter. India ROM (pre-Ind AS) grew 68% YoY to INR900m, with margins expanding 350bp YoY to 13.2% (est. 10.9%). Pre-Ind AS EBITDA more than doubled, rising 134% YoY to INR527m (est. INR369m), while EBITDA margin expanded 360bp YoY to 7.7%, driven by operating leverage. Management remains focused on improving profitability through pricing optimization, menu innovation and tighter control over fixed costs, including utilities.
* Indonesia revenue declined 4% YoY; however, RoM (pre-Ind AS) improved to INR33m vs. INR2m in 1QFY26. The company has largely completed the rationalization of Burger King stores and currently does not intend to expand, with its focus remaining on improving profitability.
* Consolidated revenue grew 18% YoY to INR8.2b, led by strong performance in the India business, while Indonesia continued to weigh on overall growth. Reported EBITDA (post Ind AS) increased 33% YoY to INR1,002m, with margins expanding 140bp YoY to 12.2%. Consolidated net loss was INR330m as compared to a loss of INR454m YoY.
* RBA continues to focus on improving store-level economics while retaining its expansion strategy in India. It added nine stores in 1Q and reiterated its plan to open 80 stores in FY27. In Indonesia, its turnaround strategy is in progress and RBA focuses on reducing losses through tighter cost controls and operational improvements. The pace and sustainability of the recovery will remain a key monitorable over the coming quarters. We reiterate BUY with a TP of INR125. We value India at 25x Mar’28E EV/EBITDA (pre-IND AS) and Indonesia EV at INR5b (0.9x EV/sales Mar’28E).
Key takeaways from the management commentary
* Management noted that the broader QSR industry has witnessed a meaningful recovery, with demand improving across the sector after several quarters of muted SSSG or a decline.
* Management indicated that the strong demand momentum has continued in 2QFY27, with the company witnessing a healthy start to the quarter and expecting to sustain traffic-led growth.
* In Indonesia, chicken portfolio remains an important growth driver, with bone-in chicken now contributing around 50% of Burger King Indonesia's sales vs. 30% at the time of acquisition.
* Management reiterated that Burger King and the promoter group's food businesses will continue to operate independently, with no plans for co-located stores or operational integration across brand.
Valuation and view
* We raise our EBITDA estimates by 5% for FY27 and 8% for FY28 considering the better delivery of margins.
* RBA continues to focus on improving store-level economics while maintaining an expansion strategy in India. The company added nine stores in 1QFY27 and reiterated its plan to open 80 stores in FY27.
* As more stores mature, improving the contribution of new outlets across the network is expected to support margin recovery. The Indonesian business should witness a gradual recovery as the company has rationalized its portfolio by closing non-performing stores. That said, we expect near-term challenges in Indonesia to persist.
* Inspira Global has acquired a controlling stake in RBA through Lenexis Foodworks and retained the existing operating leadership team. We reiterate BUY with a TP of INR125. We value India at 25x Mar’28E EV/EBITDA (pre-IND AS) and Indonesia EV at INR5b (~0.9x EV/sales Mar’28E).
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